Shares in AUB Group (ASX:AUB) have struggled to gain traction for the majority of this year. Key contributors include downward pressure on premium rates and concerns regarding AI-driven disruption of the business model. We recently researched the Company in The Dynamic Investor to assess whether the shares offer value.
About AUB Group
AUB Group is the largest equity-based risk management, advice and solutions provider in Australasia. The Company operates an ‘owner-driver’ partner model (i.e. where it holds equity stakes in partner businesses). In Australia, AUB has and has ~11% share of the intermediated general insurance market; and ~22% share of the general insurance SME segment. AUB’s business model is highly cashflow generative and carries no insurance risk, unlike the general insurers.
The Company presently operates five segments. Insurance Broking (Australia) is the main contributor to group profit. The other operating segments include BizCover, Insurance Broking (NZ), Underwriting Agencies and International. The latter segment encompasses the wholesale broking operations following the acquisition of Tysers in September 2022, retail broking operations and the recently-acquired Prestige Insurance Holdings.
Key Fundamental Drivers
Business Portfolio Performing Well Overall
The core Australia Agencies, Australian Broking and Bizcover segments continue to deliver consistent margins and volume growth above market expectations. In addition, the International segment has growth potential, as AUB restructures the platform to increase scale.
In the recent interim result (1H26), AUB continued to expand group margins (+190 basis points (bps) to 33.9%), with all segments excluding NZ Broking reporting improvement. Guidance has been lifted to include the Prestige acquisition and ‘step-ups’ (i.e. AUB increasing its equity ownership in existing underwriting agencies and brokers). However, the implied organic growth outcome for 2H26 is +4.4-11.4% compared to the prior corresponding period (pcp). This represents a slowdown on the 14.4% delivered in 1H26.
The most challenged segment is NZ Broking. The latter is less mature than the Australian Broking business. There is likely to be further pressure on EBIT margin for NZ Broking. This is due to ongoing investment required in the NZ market in order to gain market share from competitors.
Prestige Acquisition Expands International Presence
On 27 January 2026, AUB announced that it entered into an agreement to acquire UK retail & Managing General Agent (MGA) business Prestige Insurance Holdings (‘Prestige’) for $432m. The acquisition is consistent with AUB’s UK strategy of duplicating the successful Australian broking business model over the next 3-5 years.
The business complements Tyser’s UK Retail and provides opportunity for further bolt-on Merger & Acquisition (M&A) to target geographical gaps in Northern England and Scotland. AUB expect this transaction to be low-to-mid-single-digit EPS accretive post cost synergies on a pro forma basis for calendar year 2025. Notably:
i. Prestige supports margin trajectory for the International segment;
ii. Synergy potential appears to be significant; and
iii. Revenue synergies have not been included in accretion commentary but provide upside.
Is Artificial Intelligence a Threat?
One investor concern is that insurers can bypass the brokers and distribute directly to customers with the help of Artificial Intelligence (AI). However, disintermediating brokers is not considered a simple task. Insurance brokers are considered to be closer to customers and able to meet more of their needs, including risk management. There is also a trust factor with handling of customer financial information. These dynamics have seen premiums written through Australian intermediaries growing as a percentage of total Australian general insurance industry. The share gain is even higher when adjusted for a significant portion of premiums placed with Lloyd’s marketplace and other non-Australian insurers.
The risk of disintermediation is higher in personal lines insurance than commercial. AUB’s exposure is in the mid- to-high-single digits, although it is not clear what AUB’s exposures in the UK is.
Balance Sheet Scope for Further Acquisitions
As at 31 December 2025, gearing (on a net debt to EBITDA basis) was 2.41x was below the maximum gearing target of 3.0x.
The Company has sufficient balance sheet headroom to pursue bolt-on acquisitions. AUB has a strong track record of making successful acquisitions. The Company is targeting acquisitions that deliver synergy benefits or to expand capabilities and footprint.
Fundamental View
AUB shares are currently trading on a 1-year forward P/E multiple of ~12x, which is at a significant discount to the average multiple of ~19x over the last five years. The current multiple is undemanding in the context of an EPS growth profile of +8% over FY25-28 on a CAGR basis. Other factors supporting our favourable view include:
i. Potential upside to consensus EBIT margin estimates (which remain below the Company’s targets) from: a) AI adoption, where the Company is AUB Group is targeting a 150–200bps improvement in loss ratios and 15–25% efficiency gains and b) Larger-than-expected cost and revenue synergies from the Prestige acquisition. To this end, it is worth noting that the Company has a strong track record of integrating acquisitions and achieving synergies above targets (most notably, Tysers).
ii. The Company is considered to have high corporate appeal primarily due to its position as a dominant, fast-growing player in the insurance broking and underwriting agency market.
Charting View
AUB reversed nicely off its low in March and has been edging higher since then. We have also recently seen buy signals get triggered on the weekly RSI and MACD. AUB should continue to head higher from here and the first target is the major resistance zone near $28.
Michael Gable is managing director of Fairmont Equities.
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